Despite premium increases and better underwriting performance, the stock markets are hampering the recovery of U.S. p&c insurers, according to the Insurance Services Office Inc. (ISO). Although 2002 saw the largest premium increase in more than 15 years, industry surplus dropped to US$285.2 billion, a 1.5% decline over 2001. The decline also came despite 2002 seeing investors paying a record US$17.3 billion in new funds. The cause, says the ISO, are capital losses in the stock market. Investment income deteriorated 2.8% between 2002 and 2001, and capital losses doubled during the same period to US$21.7 billion from US$11.4 billion. In 2002, U.S. insurers saw premiums grow by more than 14%, and claims growth slowed to a five-year low of 2.6%. Net income last year was US$2.9 billion, a vast improvement over the loss of US$7.0 billion recorded in 2001.